ZMO Journal

Wednesday, May 9, 2018

California is considering putting cancer warnings on coffee. The reason is that it contains a compound called acrylamide that causes cancer in rats in large doses. The problem is acrylamide is also present in half the foods we eat. An article that makes a good case for the public health risks of over-warning about a problem.

Tuesday, January 16, 2018

"The Obama administration spent upward of $30 billion encouraging American hospitals and doctor offices to switch from paper to electronic records. The program was a wild success, in one respect. The number of hospitals using electronic records grew from 9 percent in 2008 to 83 percent in 2015, a huge change in less than a decade.

But the program didn’t account for a critical need: sharing. Hospital and doctor offices generally remain unable to transfer electronic information to other hospitals and doctor offices. Billions of dollars later, they are left printing out documents and faxing them."

The article is a fascinating look at yet another hunk of waste that fills our health care, helping to make the U.S.A.’s health system one of the most expensive on the planet. (I’ve written about another waste, called coding.) You know this particular waste from visiting a new doctor and filling out those endless forms, but let's lay it out:

1. You enter your patient information on one of their faded clipboard forms

2. Someone in the office types what you wrote into a computer

3. When another provider requests your info, they print it out and fax it

4. The other provider enters that info into their computer by hand — or with a "fax reader"

Expensive to retype all that? You bet. But even worse, I'd suggest, is that I count at least three chances for something to be entered wrong. If there's even a slight chance of entering any particular piece of information wrong, the sheer amount of data to be entered and the times it must be re-entered means the likelihood of something on your medical record being incorrect is pretty darn high. I'd say it's nearly certain. Hopefully it's not something critical.

This is how you can have a health care system like ours that is both more expensive AND worse than almost any other industrialized nation. Or, as my CFO Ron Maurer might put it, "You can get better health care, but you can’t get more expensive."

Is this a good thing or bad? Some will say, "It depends," but don't count me as one of them. To me it's pretty much all bad. None of these investors have any track record of making food better. They primarily make more of it and, typically, more cheaply by using cheaper ingredients, cheaper labor, cheaper whatever. They don't say any of that of course. They say "We'll expand Brand X's reach so more people have access to it," making them sound like they're doing it for the good of humanity. But the way they expand comes at a price, it always does. Look, these aren't crack coffee people buying coffee businesses. These are money people buying a chance to make more money. Conglomerate acquisitions are what they are, and they are not good for business creativity, they're not good for health, they're not good for the food.

I don't know the whole story behind any of these buy-outs. I do know that some of the companies, like Blue Bottle, had already taken on investors ($100 million in their case). That was several years earlier. After the first wave of investors came I noticed these 3rd wave notables started packaging cold brew coffee for supermarkets and opening shops and roasting plants far from home base. They were using investor money to expand their products and to expand geographically. The fact that they are now taking on more money—in some cases the new money is buying out the other investors—could mean the expansion went well. Or it could mean it went badly. Either way it'd be a good story. So far I haven't seen anyone writing about it, though. No one is talking about whether these deals were done in a climate of fear or opportunity.

One article that is particularly telling about some of the other elements in play is this interview with James Freeman, the founder of Blue Bottle. To him, fast growth is a given, as he says, "There are a few paths a company of our growth rate can take when we’re pursuing capital." To some extent you have to forgive the guy. He started his company in Oakland, just up the road from Silicon Valley. He had investors from Instagram and Twitter and elsewhere in tech. This is the way they all think. You must grow big. You must get capital big. You must sell out big. That is how success works in that world. It's classic Silicon Valley, down to the galling self-effacement of a mulitmillionaire shrugging off how rich he is after the buyout saying, "I’ve got kids at home, so security feels great."

The good news behind this, the news that enabled it in the first place, is that small roaster coffee technology has come a long way. You can install a roaster in a single shop and pretty much make the economics work. The big companies can buy what they will. They always do. I have faith the small coffee world will still thrive.

Friday, May 5, 2017

This is one of many articles I've read over the last year that detail the ways companies are looking at your browser history, location, time of day and other data to decide what to charge you for something they sell. It's called dynamic pricing and, for better or worse, it's something we can expect to continue, at least in some corners of the internet. Like shopping for airline flights. It's been part of plane ticket pricing for a long time and it's often maligned, sometimes frustrating, but it's worth remembering that the average domestic plane ticket costs almost half what it did in 1980 and dynamic pricing is part of the reason.

There will always be some vendors (like my site Zingermans.com) who choose to not use dynamic pricing. My prices are fixed and to some extent I like it that way. Still, on December 22nd, after we've cut off orders for Christmas, it'd be interesting to see what someone might pay for a coffeecake...but it's not gonna happen.

Using data to have the price match the person's willingness or ability to pay is really a lot older than fixed pricing, as the article points out. It used to be called haggling. With web browsers and Amazon it sounds sinister but the principle is based in fairness. If people who can afford to pay more do pay more, then those who cannot afford to pay that much can be charged a lower price. Each pays according to their means and, in the end, the prices average out and the vendor makes the same revenue it would have if it charged everyone some hypothetical fixed average price.

In practice it's not so clear that's always what's happening. To top it off, almost none of this new big data computer haggling is transparent. The vendors hide their analysis of you in a black box. You have no idea what data they're looking at and how they evaluate it. (For more on the problems with non-transparent algorithms that segment people, the former investment quant Cathy O'Neil's book Weapons of Math Destruction is totally worthwhile.) In the end, though, I believe all secret codes don't stay secret for long. It's only a matter of time before someone cracks Amazon's dynamic pricing algorithms just like Farecast unlocked airline ticket prices. But in the meantime it does feel dirty, doesn't it?